Tribunal upholds Swiss Challenge Method for fresh auction of corporate debtor's assets with anchor bid protection

NCLAT upheld the Adjudicating Authority's direction for conducting a fresh auction using Swiss Challenge Method for corporate debtor's assets. The tribunal rejected the appellant's challenge to the Swiss Challenge Method, confirming that the liquidator must issue a corrigendum within two weeks to conduct e-auction. The successful bidder from previous auction was granted anchor bid status, with their bid protected if no higher offer emerges. The tribunal directed that winning bidder must pay all MIDC dues and transfer charges directly to MIDC.

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Issues Involved:
1. Approval of private sale in favor of Eshan Minerals Pvt. Ltd.
2. Participation of Sachani Developers in the bidding process.
3. Conducting fresh e-Auction using the Swiss Challenge Method.
4. Submission of EMD by Best One Infraventures Pvt. Ltd.

Summary:

Issue 1: Approval of private sale in favor of Eshan Minerals Pvt. Ltd.
The Appellant, Eshan Minerals Pvt. Ltd., a successful bidder in a private sale, challenged the order dated 13.02.2024 by the Adjudicating Authority, which refused to approve the private sale. Eshan Minerals offered Rs. 15,80,00,000/- plus GST and paid 25% of the sale consideration as Earnest Money Deposit (EMD). The Adjudicating Authority noted that the private sale should maximize realizations and attract more interested buyers. The Tribunal upheld the Adjudicating Authority's decision, emphasizing the need for transparency and competitive bidding.

Issue 2: Participation of Sachani Developers in the bidding process
Sachani Developers expressed interest in participating in the purchase of rights in the property under private sale after the Letter of Intent (LoI) was issued to Eshan Minerals. The Adjudicating Authority allowed Sachani Developers to participate in the bidding process. However, Sachani Developers withdrew their offer on 26.02.2024. Despite this, the Tribunal noted that the Auction Notice had already been issued, and EMD was received from another party, justifying the continuation of the auction process.

Issue 3: Conducting fresh e-Auction using the Swiss Challenge Method
The Adjudicating Authority directed the Liquidator to issue a fresh notice for conducting a sale using the Swiss Challenge Method, treating Eshan Minerals' bid as the anchor bid. The Tribunal upheld this direction, allowing other interested parties to participate and ensuring that the highest bid would be accepted. The Liquidator was instructed to issue a corrigendum for the e-Auction within two weeks and to complete the sale process within one month.

Issue 4: Submission of EMD by Best One Infraventures Pvt. Ltd.
Best One Infraventures Pvt. Ltd. claimed interest in the bidding process but did not submit the EMD. The Tribunal allowed Best One Infraventures to submit the EMD within a week and participate in the Swiss Challenge Process. The Tribunal emphasized that if no higher bid is received, the private sale in favor of Eshan Minerals as per the LoI dated 21.11.2023 would be confirmed without further approval from the Adjudicating Authority.

Conclusion:
The Appeals were decided as follows:
1. The order dated 13.02.2024 by the Adjudicating Authority was upheld.
2. The Liquidator was directed to issue a corrigendum for the e-Auction within two weeks.
3. Best One Infraventures Pvt. Ltd. was given the liberty to submit its EMD within a week and participate in the Swiss Challenge Process.
4. If no higher bid is received, the private sale in favor of Eshan Minerals would be confirmed.
5. The Liquidator was to issue LoI to the highest successful bidder post the Swiss Challenge Method.

Costs:
Parties shall bear their own costs.

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